Operations Management
17th Edition
ISBN: 9781259142208
Author: CACHON, Gérard, Terwiesch, Christian
Publisher: Mcgraw-hill Education,
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Chapter 14, Problem 12CQ
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To identify: The course of action that will help in achieving the goal.
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What is the relationship between the average inventory and the in-stock probability?a. The more the inventory, the lower the in-stock probability.b. There isn’t a definitive relationship—more inventory could mean a lower or a higherin-stock probability.c. The more the inventory, the higher the in-stock probability.
A store has collected the following information on one of its products:Demand = 4,500 units/year Standard deviation of weekly demand = 12 units Ordering costs = $40/order Holding costs = $3/unit/year Cycle-service level = 90% (z for 90% = 1.28) Lead-time = 2 weeks Number of weeks per year = 52 weeks a.
If a firm uses the continuous review system to control the inventory, what would be the order quantity and reorder point?
It takes approximately 2 weeks (14 days) for an order ofsteel bolts to arrive once the order has been placed. The demandfor bolts is fa irly constant; on the average, the manager, MichelleWu, has observed that the hardware store sells 500 of these boltseach day. Because the demand is fairly constant, Michelle believesthat she can avoid stockouts completely if she orders the bolts atthe correct time. What is the reorder poin t?
Chapter 14 Solutions
Operations Management
Ch. 14 - Demand in each period follows the same normal...Ch. 14 - Prob. 2CQCh. 14 - For products with slow-moving demandfor example,...Ch. 14 - Prob. 4CQCh. 14 - Prob. 5CQCh. 14 - Prob. 6CQCh. 14 - Prob. 7CQCh. 14 - Prob. 8CQCh. 14 - If the target in-stock probability increases, then...Ch. 14 - Prob. 10CQ
Ch. 14 - Prob. 11CQCh. 14 - Prob. 12CQCh. 14 - Prob. 13CQCh. 14 - Prob. 14CQCh. 14 - Prob. 15CQCh. 14 - Prob. 16CQCh. 14 - Prob. 17CQCh. 14 - Prob. 18CQCh. 14 - Prob. 19CQCh. 14 - Prob. 1PACh. 14 - Prob. 2PACh. 14 - Prob. 3PACh. 14 - You are the owner of Hotspices.com, an online...Ch. 14 - Prob. 5PACh. 14 - Prob. 6PACh. 14 - Prob. 7PACh. 14 - Prob. 1CCh. 14 - Prob. 2CCh. 14 - Prob. 3CCh. 14 - CASE WARKWORTH FURNITURE1 Warkworth Furniture...Ch. 14 - CASE WARKWORTH FURNITURE1 Warkworth Furniture...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, operations-management and related others by exploring similar questions and additional content below.Similar questions
- The owner and manager of a hardware store reevaluates his inventory policy for hammers. sells an average of 50 hammers a month, so you have placed purchase orders for 50 hammers with a distributor at a cost of $20 each at the end of each month. But the owner does not place all the store orders and find that this takes much of your time. He estimates that the value of his time spent ordering hammers is $75. a) What must be the unit cost of maintaining hammers for the current policy of the hardware store to be Optimal according to the EOQ model? b) If the distributor delivers an order for hammers in 5 business days (out of an average of 25 per month), what should be the reorder point, according to the EOQ model?arrow_forwardA golf specialty wholesaler operates 50 weeks per year. Management is trying to determine an inventory policy for its 1-irons, which have the following characteristics:Demand (D) = 2,000 units/yearDemand is normally distributedStandard deviation of weekly demand = 3 unitsOrdering cost = $40/orderAnnual holding cost (H) = $5/unitsDesired cycle-service level = 90 percentLead time (L) = 4 weeksa. If the company uses a periodic review system, what should P and T be? Round P to the nearest week.b. If the company uses a continuous review system, what should R be?arrow_forwardGiven this information:Lead-time demand = 615 poundsStandard deviation of lead time demand = 48 pounds (Assume normality.)Acceptable stockout risk during lead time = 4 percentUse Table. a. What amount of safety stock is appropriate? (Round your answer to the nearest whole number.) Safety stock units b. How much of this item should be reordered? (Round your answer to the nearest whole number.) ROP units c. What risk of stockout would result from a decision not to have any safety stock? (Omit the "%" sign in your response.) Stockout risk %arrow_forward
- A manufacturing company uses 25,000 components at an even rate during a year. Eachorder placed with the supplier of the components is for 2,000 components, which is theeconomic order quantity. The company holds a buffer inventory of 500 components. Theannual cost of holding one component in inventory is $2.What is the total annual cost of holding inventory of the component?arrow_forwardFor a company operating 300 days a year, the annual demand is 63,000 units, the lead time is 4 days, the ordering cost per order is BD 80 and the inventory turnover is 12, the reorder point is A. Every 12 days B. Every 4 days C. When 175 units remain D. When 840 units remainarrow_forwardA golf specialty wholesaler operates 50 weeks per year. Management is trying to determine an inventory policy for its 1-irons, which have the following characteristics: > Demand (D) = 2,000 units/year > Demand is normally distributed > Standard deviation of weekly demand = 2 units > Ordering cost = $30/order > Annual holding cost (H) = $5.00/unit > Desired cycle-service level = 85% > Lead time (L) = 4 weeks Refer to the standard normal table for z-values. a. If the company uses a periodic review system, P should be 3.87 weeks. (Enter your response rounded to the nearest whole number.) T should be units. (Enter your response rounded to the nearest whole number.)arrow_forward
- The best quantity to order One of the formulas for inventorymanagement says that the average weekly cost of ordering, payingfor, and holding merchandise iswhere q is the quantity you order when things run low (shoes,TVs, brooms, or whatever the item might be); k is the cost ofplacing an order (the same, no matter how often you order); c isthe cost of one item (a constant); m is the number of items soldeach week (a constant); and h is the weekly holding cost per item(a constant that takes into account things such as space, utilities,insurance, and security). Find dA>dq and d2A>dq2.arrow_forwardYou are managing a company that stocks and distributes hardware. Thecompany employs two purchasing agents who receive combined salaries of$90,000. They process 6,000 purchase requests per year. Average inventoryin storage is $600,000, and the total cost of running the warehouse is$200,000. You are told that the company purchases 5,000 hammers per yearat a cost of $5.34 per hammer.a. Using the economic order quantity (EOQ) formula, how many hammersshould be ordered at one time?b. If the hammer vendor stated that it would charge $5.00 per hammer if youordered 200 or more at a time, what should you do?arrow_forwardAn electronics retailer wants to develop an inventory policy to achieve 99% chance of not getting stockouts for a chip. The daily demand for the chip is estimated to be Normal with mean 200 and standard deviation of 20. They count the chip inventory every 2 weeks to place an order, and it takes 11 days for the ordered chips to be delivered. The retailer operates 7 days a week, 365 days a year. They are going to implement an order-up-to model. A) What base stock level should they choose? B) What is the number of chips they would have on order (on average)? C) When they checked their inventory of chips to place a new order, they found that they ran out of stock completely. In addition, they have 10 chips on way to be delivered, while there are five customers who paid for 20 chips in total and are waiting to receive their chips. How many chips should the retailer order?arrow_forward
- The manager of a local retail store is ordering a specialty item from a supplier in Toronto. The lead time is cons days. The store is open 300 days a year (50 weeks Monday-Saturday, with a two-week vacation). The average. is 40 units, with a standard deviation of 7.6. (Assume that the distribution is approximately normal.) It costs $40 to place an Time left 1:45:28 order, and the annual holding cost is 30% of the inventory value. The supplier charges $8.00 per unit. Find the economic order quantity (EOQ). O a. 1788 O b. 346 O c. 36 Od. 632 The manager of a local retail store is ordering a specialty item from a supplier in Toronto. The lead time is constant at five days. The store is open 300 days a year (50 weeks Monday-Saturday, with a two-week vacation). The average daily demand is 40 units, with a standard deviation of 7.6. (Assume that the distribution is approximately normal) It costs $40 to place an order, and the annual holding cost is 30% of the inventory value. The supplier…arrow_forwardAt Dot Com, a large retailer of popular books, demand is constant at 17,000 books per year. The cost of placing an order to replenish stock is $8, and the annual cost of holding is $3.00 per book. Stock is received 12 working days after an order has been placed. No backordering is allowed. Assume 250 working days a year. books. (Enter your response rounded to the nearest whole number.) orders. (Enter your response rounded to the nearest a. Dot Com's optimal order quantity is 301 b. The optimal number of orders per year is whole number.)arrow_forward11. Through its online accessory store, Gateway sells its own products, as well as products made by other companies. One of these products is the WB150 WolfByte laptop computer: Estimated annual demand: Cost: Lead time: Standard deviation of weekly demand: Standard deviation of lead time: Holding cost per unit per year: Ordering cost: Desired service level: 15,376 laptops (50 weeks per year) $640 per laptop 2 weeks 16 laptops 0.3 weeks 40% of item cost $25 per order 95% (z = 1.65) a. (*) What is the economic order quantity for the laptops? Calculate annual ordering costs and holding costs (ignoring safety stock) for the EOQ. b. (**) What is the reorder point for the laptops? How much of the reorder point consists of safety stock? c. (**) Suppose Gateway decides to order 64 laptops at a time. What would its yearly ordering and holding costs (ignoring safety stock) for the monitor be? d. (**) Because computer technologies become obsolete so quickly, Gateway is thinking about raising…arrow_forward
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